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[LONDON] Iran's post-sanctions ramp up of crude sales will likely intensify competition among oil producers for a share of the Mediterranean oil market as the country seeks to win back customers it was barred from supplying since 2012, the International Energy Agency said.
Iran is expected to target a supply of 250,000 barrels per day to refineries in the Mediterranean, the IEA said, placing it in direct competition with producers selling sour crudes including Saudi Arabia, Iraq and Russia. Iran is likely to add 300,000 barrels of crude per day to world markets by the end of the first quarter, below the nation's own estimates, the Paris- based adviser estimated.
After the removal of sanctions on Jan 16, attention is turning to which markets Iran will attempt to win back and how much oil it can produce. A further slump in prices is likely if Iran can move quickly to sell its oil under attractive terms, the IEA said. Brent crude has already plunged in value by 21 percent this year.
"Iranian barrels are likely to back out similar quality sour crude from Saudi Arabia, Iraq and Russia - so producers are likely to become ever more competitive on the pricing front," the IEA said.
As it attempts to claim market share in the Mediterranean, the National Iranian Oil Co will seek to reactivate its contract with the SUMED pipeline that carries oil from the Red Sea into the region, the IEA said. Iranian oil officials met with Hellenic Petroleum SA on Friday, prior to the lifting of sanctions, according to a Reuters report citing a company source.
In the longer-term Iran, "will have its work cut out" to overtake Iraq and regain its status as the second largest producer within the Organization of Petroleum Exporting Countries, the IEA said. Foreign investment could push daily production to four million barrels by the end of the decade, the IEA said. That would still be less than its estimate for what Iraq currently produces.